1. **Problem Statement:** Calculate the Effective Annual Rate (EAR) for a 5-year car financing plan with 0% interest, where the car price is 2300000, monthly payments are 38333.33 for 60 months, and a cash payment option offers a 200000 rebate (2100000 total). 2. **Understanding the Problem:** Although the financing plan advertises 0% interest, the difference between the cash price (2100000) and the total financed payments (38333.33 \times 60 = 2300000) implies an implicit cost of financing. 3. **Formula for EAR:** $$EAR = \left(1 + \frac{i}{n}\right)^n - 1$$ where $i$ is the nominal annual interest rate and $n$ is the number of compounding periods per year. 4. **Calculate the implicit interest rate:** - Total financed amount paid: $$38333.33 \times 60 = 2300000$$ - Cash price with rebate: $$2100000$$ - Interest paid over 5 years: $$2300000 - 2100000 = 200000$$ 5. **Calculate monthly interest rate $r$ using the loan payment formula:** $$P = \frac{r \times PV}{1 - (1 + r)^{-n}}$$ where $P=38333.33$, $PV=2100000$, $n=60$. 6. **Rearranged to solve for $r$ (monthly rate):** $$38333.33 = \frac{r \times 2100000}{1 - (1 + r)^{-60}}$$ 7. **Using numerical methods or approximation, $r \approx 0.0041667$ (0.41667% per month).** 8. **Calculate EAR:** $$EAR = (1 + 0.0041667)^{12} - 1 = 1.05116 - 1 = 0.05116 = 5.116\%$$ **Final Answer:** The Effective Annual Rate (EAR) of the financing plan is approximately **5.12%**.